Violin Memory Plunges 17% on Debut: CEO Basile Talks Life Beyond HP

By

Tiernan Ray

Updated Sept. 27, 2013 2:04 p.m. ET

Text Size

Regular

Medium

Large

Shares of solid-state drive (SSD) array maker Violin Memory (VMEM) of Santa Clara, California, are down $1.54, or 17%, at $7.46, on their first day of trading, after the stock opened at $7.60, below its offer price of $9.

I spoke with CEO Don Basile a short while ago. Basile was formerly head of another flash memory outfit in the enterprise storage market, Fusion-io (FIO).

"This capital will help us in our war against EMC (EMC), our primary competitor," Basile tells me.

I asked Basile first about the main concern of many investors, the fact that Hewlett-Packard (HPQ), which was once a major reseller of product for Violin, which once made up 65% of sales, as noted in the IPO prospectus, but that relationship appears to many investors to have fallen apart.

Basile tells me the deal was signed under one-time HP CEO Leo Apotheker, and when Apotheker departed in 2011, with Meg Whitman replacing him, Whitman pulled away from Apotheker's emphasis on partnerships and instead focused more on internally developed product.

Basile points out the company has continued to grow revenue at a high clip despite HP's lessened role, and HP remains partner, but it is a partnership that "does not drive revenue today," as he puts it, though, "We always remain open to working with HP."

Some folks are confused because our fiscal year is one month off [ending in January not December] We are now in our seventh quarter since any meaningful revenue came from HP. We have moved past that, growing every year. It's kind of in the rear view mirror for us. We signed a relationship in July of 2011 under Leo, and then Leo was dismissed. He had more of an enterprise focused strategy. A new CEO came in and went a different way, and focused less on partnering.

Basile points out the company has just added a global partnership with Dell (DELL), and a partnership in EMEA with Fujitsu, and already has partnerships with SAP AG (SAP) and Microsoft (MSFT).

Violin, according to reports from both IDC and Gartner, is number one in the flash memory storage array category, he notes.

"We blew by the other guys in the market," he says, including firms founder earlier than Violin.

And Basile expects to maintain an advantage with a focus on the memory chip guts that distinguish the company's arrays from other using commodity parts, because, as he avers, "hardware is hard to do."

Hardware, he tells me, as Larry Ellison, CEO of Oracle (ORCL) knows, "is the ultimate software optimization," and Violin will continue to focus on developing its memory chip components, along with software, he says:

We expanded our software with our Symphony Console in Q2, and at Oracle OpenWorld, we showed off our Maestro platform and tiering software […] We are moving our enterprise storage software into our chip technology the same way Ellison has moved his software into hardware systems, down to the chip level. The guys at Cisco [Systems (CSCO)] understand this. People talk about SDN [software-defined networking], but Cisco knows SDN isn't it just software, and they're using their chip technology to make it work.

I also asked Basile about another storage startup, Skyera of San Jose, whose CEO and co-founder, Radoslav Danilak, sold another startup, Sandforce, to LSI (LSI), and who is well-regarded in the Valley for his understanding of the deep physics of flash memory. Basile says that Danilak is, like him, a veteran of flash outfits, and that he and Danilak are "philosophically very close" in their focus on hardware as a key differentiator in the array market.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.